W.H.'s late push for $26B state aid bill

With a Senate vote slated for Monday evening, the White House shows signs of a late-breaking push behind a $26.1 billion aid package to help state and local governments cope with revenue shortfalls due to the continuing housing crisis and slow economic recovery.

Last year’s recovery act helped fill the gap, but as the stimulus funds run out, Democrats fear more state layoffs, beginning with teachers just months before November elections. Cash-strapped governors are promised $16.1 billion to pay Medicaid bills next year and ease their budget situation; another $10 billion in education assistance would go to school boards to help with teacher hiring — a top priority for Education Secretary Arne Duncan.

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“There is a tremendous amount at stake here,” Duncan told POLITICO. And even with the House gone until mid-September, he insisted that Senate passage would give local school boards “a real sense of hope” that federal dollars will be coming in time to avoid layoffs impacting tens of thousands of teachers. The package, which has received little attention to date, was filed only last Thursday by Senate Majority Leader Harry Reid (D-Nev.) in what seemed more an effort to disentangle the teacher-Medicaid issues from a small-business bill, which the White House wants badly.

Monday’s vote to cut off debate will require 60 votes — a high bar to meet and one that will require Republican help.

To that end, Reid offset the full cost through a combination of foreign tax credit provisions and $17.1 billion in savings, chiefly from cuts to food stamps and prior appropriations. The Medicaid assistance, which extends a program that began under the recovery act, is designed to be phased out in the first six months of 2011 — recommended by Sen. Susan Collins (R-Maine).

At least one member of Reid’s caucus, Sen. Ben Nelson (D-Neb.), is still undecided, according to his spokesman. And the package has come up in such a low-profile, almost haphazard way that its political prospects are difficult to read.

President Barack Obama made no mention of it in his Saturday radio address — instead focusing on the small-business bill itself. Pennsylvania Gov. Edward Rendell, a huge champion of the Medicaid funds, didn’t mention it in a Sunday appearance on NBC’s “Meet the Press.”